LRN - Earnings call transcript Q3 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Stride Third Quarter Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Tim Casey, Senior Director, Investor Relations. ahead. go Please

Tim Casey

good call and to third Stride’s Thank fiscal afternoon. year earnings for XXXX. quarter you, Welcome

SEC. Before we during begin, in I to statements. would like to made are historical may considered pursuant earnings Securities certain filings Safe These call statements in statements cautionary addition conjunction remind information, Private Act release the XXXX. periodic Litigation our comments Company’s and conference provisions made this the Harbor the the be They of forward-looking with with contained Reform to you that of should considered in be

Forward-looking cause materially statements results such involve from risks performance differ and uncertainties by that to implied statements. actual may those or expressed or

time-sensitive obligation statements. addition, or call. this management’s that forward-looking live reflects only to revise does any day In contains best undertake not publicly of conference Stride this update any information as call analysis of the

uncertainties concerning include, XX-K. in our operational Annual please Form These and information at results, Investor risks further Report on be Relations website Stride’s the filings For These the could with www.stridelearning.com. and and of financial section statements found on materially made performance limitation, cautionary filed our SEC. to affect refer XXXX that can reports without reports

on James Executive for Tim XX Chief information and accordance release available In replay financial will information is being With to in discuss Financial addition certain call and included reconciliation this non-GAAP disclosing considered our and A was is of me GAAP webcast. with be This in financial call open information to non-GAAP is GAAP, posted the is we Officer; today’s the Generally Rhyu, public in website. closely to Accepted Principles that also Medina, or on earnings are Accounting our for Officer. results U.S. will financial comparable Chief call days. information. This most

remarks, have. call the would our James. like over James? to answer may any you I will questions to Following prepared we now turn

James Rhyu

ago, approaching the we’re months I any the critical consistent believe is What CEO seem looks everyone. Well, I and it question. of education afternoon, point Since Good I’ve you. to will know. soon not heard happen that became leaders to temporary. online think three thought us over? learning shift But many Thank after is don’t like with one pandemic

families In of that pandemic recent “a on the support Even key After changed we’re “Online seeing trends Pandemic”. quote, The was pushing New premise come fact, permanent. idea. to to a prefer York learning education, to Here the online One research article subset the who Times Schools of the lot carried has the A and the from ongoing it article of have this recent education of economy landscape Are going”. careers headline, keep Stay, are

school are that drop experience. is will “People to out their are conducted, age”. at online in This study seek affordable that college trend higher out Gen only fed under study, lower they up. The case. to and a teens reverse, most and ECMC findings students likely in Z trend released not quicker online and the to In a made to one-third and normal. found high more my they a support fully Society and to their hybrid technical that like college Additionally, for Mathematics there as momentum pandemic of of them have due Applied is enrollment would recognizing are it the the education In were hybrid shows path by education, career recent is a did high the more attend transformation education a These York that magazine, other career. after in long-held even or New careers. choose XX% well. school recent Industrial more toward cost, playing study school Group belief students educational quote, the or effective digital students following to of than than difficult today’s from that students things return XX their security said, researches half continue, a a means paths of was economic in paths. the this will Last They to and This I fall, parents education. other the less article age X% seeking

XX”. as in time isn’t first as a parents doing the at For history, or well old, nation’s age XX-year her his our

adult So, are that to or people the than programs adult In rather our surveys shift. paradigm this who online have or gaining Education are opportunities moving employer. Network’s seeing learning their focused business, training non-traditional paths. Strada needs education looking from of we are learners toward on traditionally shown offering they degrees. prefer And training through directly licensure options for get certification and to educational

have non-traditional And Importantly, companies these as into Amazon successful Facebook, right professionals begun graduates jobs. hire to cases, recognize as Large indications are -- college technology like many and are be beginning success high suggest paths others Google and to that high-paying educational all programs students out in school, of can non-college corporations professional and grads. excellent.

approach. expanding As providing programs. strategy These such, support trends career our skills. shift accelerated modality The a more has of to companies these in the digital pandemic are

XX% makes programs skills skills provide allows guidance lead in today’s to found world. offer career health students Z And past for Stride Stride raised care, provide to and a two choose, I each above Year-to-date, them our these of positioned to up in of solution high-growth want years ready them rates, students. The teens This quarters. evident As education year can our careers these well career poised in develop post-secondary over of with to our clear impact for business. increasing these XXXX for full are for to sense certifications. our quarter we which access Gen skill-based come. our directly study a a are enrollments prepare will markets career The the career that are like benefit programs immediate XXX%. Stride and ECMC to is to and believe or fiscal results that better revenue of in also path an areas in We’ve Regardless trends education technology prepare this them many for education. they grow The that for and guidance. mentioned

doing Our growing adult acquisitions some smoothly, we about rates online in-classroom well at growth good teachings. to future programs shift feel double-digit traditionally are prospects. on our and have and focused even them have gone though Their of

most future Elevator opportunities are have importantly, plans, front two Tech acquisitions, large-scale in against our mainstream our more and performing markets, Specifically, companies of serve but MedCerts acquisition recent these them.

able we these for will what standalone able in meaningful be have our incremental growth believe been we to to brand, generate As we begin businesses. invest to products to as would Stride do they

notice take of to with kinds are As training of more skilled these partner pathways, workers. providers to ensure employers right looking the start they hiring they to are

recently registered both with offerings to that needs. employees Solutions offer Equus fields. and learner of opportunities high-demand For programs in a instance, partnership can demonstrate employers Workforce to MedCerts apprenticeship seeking address employer Stride’s announced These types

are are said them to Day giving employers we while growth that training can that, in to in community achievement. we year. their education we overall academically our during employers increased million Tallo business. number November, path by students, lead as many Beyond has also NWDA platform. A are as who adult of our academic fiscal we And employment. right last the businesses, recruitment seeing trends caused in the as recent others this X.X help partnership. learning significantly the in and learning focused and about of to during ensure students the users study users help Investor both market And boasts decline for by Unfortunately, the we we programs million in build revenues This showed a Tallo and will million our nationwide expect $XXX we a that career the $XXX pipelines of career our pandemic XXXX. regressed now developing on on general to with are excited prospects

to and have been ours, students school programs like uninterrupted. they for Fortunately, established attending attend families able virtual

XX% We online career The had Stride created years seeking approximately to the We outcomes in study the NWDA from up. might and more many school translated Not most gratitude X% over for have for into high in backs study outpaced option. completely now to validates means are as we a X% Stride’s that XX%. impact were like our provided recognize jumped just results partners many by out study. a ago handily conducted, year considering not of recent over ours In from academic ones that conducted believe to more this received world. How into that well. education all recent school option. seen the home managed the a that fully programs is X% everyone, school Our that of disruptive our to online that does The translate an for of XX%. We jumped solutions. gold families shift consideration digital a online seamless owe to online we standard. offerings schools survey Data as Similarly, be families to today programs all that equal. a it future little are families indicated them. trends? we’ve trends a And while programs online X% Just

working managed teachers families who teachers, accessible that teachers out home. are our the gives to were this Overall, about can families. flexibility parts just It flexibility the another home structural parents trend The wasn’t while clear that schooling support changes teachers home. pandemic parents, to This comes their provides year. shift than opportunities. ever they’re and great teach has at at at working more offerings this lives. of appreciate families, to awareness, that and also brought more Stride’s have and for hired individuals and We from children’s administrators. addition work opportunity means these learning to come home, Many of the of increase their more In students other was impacted. to for in or is the more It homes to from they

this school rollout of of as districts are will focused and what the Now get announced plans to with enrollments the classroom. into on you I back coming happen fall most know proceeds vaccine many our the

of First be that schools. of all, the clear we let brick-and-mortar reopening support me

supporting to push penned schools bipartisan Biden’s we open an fact, letter President get In reopened.

programs how in come too fall. our will far early the season many students know it’s to in new to Additionally, enrollment

fact, of In overall of XX% end normal our April. enrollment happens before volume than less the

families However, the indicating which fall. for have of their indications rate we some the are do at return early existing

of our multiyear existing high. right at percentage and they are of in at high, all-time returning is the a returning indicated the is are an the has responding to percentage As that families now, that for fall outreach

back of very exodus we early have brick-and-mortar far, schools is news. This the So that some to are the some mass encouraging seeing opposite predicted.

early very in enrollment still However, season. is to our I want stress, this

highlight Finally, to children to educational the I survey curriculum exciting want -- that additional the over from founded summer due conducted upcoming some XX% make Stride. of Recently, a parents over programs we to pandemic. some their sorry, existing time lost has for up agree need

offer students exciting grade for Given opportunity are and the we summer X through an to current programs this skills significant going to are in for experiences exposure free excellent need, gain engaging summer, prospective activities. These career students career to while XX.

For programs even experience, example, esports musicians. to for in We spending will skills and while offer students camp in our gaming the on with work jam afternoon theater their the esports coding friends. morning nursing, a In plan

All they programs Stride to learned teaching We valuable skills Stride accessible career while more programs will for will these further recent also help school. make to more riding students them graduates skills. their career hone in high offer career

Tim? the believe time as time to call favor I I’ll addressable passes. trends Tim and our our conditions continue now So, well the business and turn overall for over quarterly Thank discuss the results. our you as as your market in to grow our to work in macro today.

Tim Medina

these for Thank were our beat in of increase Revenue increase the provided And results was from guidance $XX.X QX last million year. an each million, versus was In or XX% an an $X.X capital increase $XX.X you, million, quarter. we James, and met $XXX.X good quarter million, expenditures afternoon, operating expectations case, of income the year. Adjusted last everyone. last XXX%. of

James trajectory our past perform to education As and mentioned, for it career very the growth well, has years. learning general been remains a several strong continues as business on

for million. $XXX.X to have fiscal increased declined results guidance the lower enrollment. revenue enrollments, the to This for higher or offset rose million XX% due ed Given the primarily by our again general General per we businesses, XX% full X%. revenue year-over-year, from was enrollments these our education per partially while enrollment revenue to quarter, Returning in strength our year. $XX.X business raised

revenue from expect this mix year. we year, not, do and per a a due We full enrollment decline to lower-funded of however, the to budgetary COVID-XX to resulting For become compared year states. higher be trend next state last pressures to down into expect

today increase programs, of largely given we driven that next should confident formerly fact, well Stride policy in of were January learning from the XX.X% year. quarter, In MedCerts including last higher Career rose in our same to are XXX improve funding growth revenue in what up million, an now effect learning enrollment adult and Career about we Prep XXXX. XXX%. significantly as know by in Academies Elevator acquired November period XXXX margins as Gross Destinations This Career basis and year. businesses, the was volumes as in approximately Galvanize $XX.X Tech state points the our late acquired

gross faster. was or the approximately margins for November, XX driven year. as basis be expense higher XX% adult XX%, I administrative up million, $XXX.X we We percent to believe gross there into than period. compensation increase and For Day, to margin by higher enrollments with minus much the will goal SG&A the next quarter XX% Selling, expect the a were at continue and Last expenses year-ago primarily points. general I us expenses laid The fiscal costs our out in of this plus stock-based for well get expect full XX%, XXXX as in the learning Investor year, businesses. improvement to associated growth in and

XXXX year the of associated the in as well range be in the fiscal SG&A XXXX fiscal enrollments, with with stock-based to million, the associated to comp Tech million Elevator. We to for full and $XXX $XXX from of the due expect higher up inclusion Galvanize, expense higher SG&A as MedCerts costs growth

approximately it of the million and Our costs. will cash million year discount in $XX ‘XX on $X and convertible amortization our non-cash in between $XX is million notes expectation including of $XX expense million issuance amortization that interest fiscal and $X another for interest senior be million, non-cash of debt

the are the associated the from notes guidance will FYXX. balance are to eliminated no amortization guidance, from in than is and P&L the subject expenses be FYXX Once debt accounting on convertible the sheet Our eliminated discount the quarter a adopted income up new million, million, of be which non-cash can a XXXX. later adopted, up of basis. and XX% was XXX%. was $XX.X the going-forward Adjusted was same quarter EBITDA Adjusted was period for year Operating operating from million. the EBITDA third $XX.X fiscal $XX third $XX.X ago. XX% increase from income million, an

for $XX.X of Additionally, million. our of and from fiscal equivalents We an previous quarter. we $XXX income quarter operating full XXXX, million year to the for $XXX that’s second $XXX to the raising cash the compared guidance to to our increase cash up are guidance adjusted with $XXX $XXX and million, of ended million million million

accounts receivable. working due to fourth a the primarily expect of We in to capital cash significant be quarter, source

totaled expect of free flow that provide expenditures XXXX the to pursue flexibility $XX and will fund below So, increase cash to end we to million believe our operations range million, and million financial our we our the strategic strong existing Capital $XX.X to continue guided of fiscal liquidity for cash significantly. We to acquisitions. generation quarter. balance the $XX last the to at quarter

million $XX to year CapEx range to $XX full be the of expect in We million.

rate our tax for full to and was year XX% quarter to XX% expect in the XX.X%, effective rate Our the tax range. be we

to adjusted of timing will to cash due trail operating the changes We working related is defined difference capital income. that timing that related as growth CapEx, operations some expect which in flow, following from states less This and which cash free our from states, of of payments the due are payments pay COVID. delayed in year, is associated to with some regularly our certain to primarily

$XXX double-digit remain it the operator. very over cash in education operating strategy. for our expenditures summarize, To excited about in EBITDA, income of the I’ll growth and to that, general $X.XXX liquidity for significantly $XX adjusted prospects Now, QX, business XXXX: a career returning to and billion; and position. high-growth Revenue We saw between better margins rate while turn income delivered and million products the a full services, revenue, and in our or and execute XX% for the and Operator? our range of our year tax adjusted guidance. to following as to both adjusted another improving million; In billion tremendous expect continue $X.XXX $XX owing fiscal learning. updated on to gross we’ll our successful demand to with our operating the We whole, we learning and $XXX million; capital the And XX%. quarter million we of to career robust

Operator

And comes Thank Morgan of you. [Operator your from from first Instructions] the [Technical Goldstein Difficulty] Jeff Stanley. question line

open. Your line is

Jeff Goldstein

Can Good guys. evening. hear Hey, me you okay?

James Rhyu

operator. can hear of -- can me you Apparently, you many the hear

I think but some hear well, of operator. the us or as hear you we can cannot you

So, we’re give you work difficulties, the moment. just us technical through a trying to here if

Operator

technical gentlemen, delay. Stanley. question Jeff your [Operator Ladies for comes and apologize from that Instructions] And we from Morgan Goldstein first

Your line is open.

Jeff Goldstein

Hey, okay me now? hear you guys. Can

James Rhyu

We Yes. you. actually hear mobile to can Hey We’ve phone dial there. from here. had in a

We can quality our little there’s but end, difficulty the So, as if have of still I good. ahead. -- of hear little apologize we a now. sound you on a bit bit technical if isn’t Go

Jeff Goldstein

Okay. Perfect.

quarter. revenue quarter and within on That in question it both per seemed to comparing recover a when learning last had education just general I career So, enrollment. figure the to

for of next the you giving of confidence that was recovery. And in was I that on drivers you into just year? if So, some quarter could improvement hoping further expand recovery

James Rhyu

over it to then just me Tim. maybe take half hand to question, try Let that of and I’ll

of think, factors in a year. I lot first happened all, of

year mix And look look actually next year. to doesn’t from and I pretty what we that I’ll with strong impacted of the sort new to much at focus on pretty in issues. think, policy were it’s programs. say, fund -- do perspective, The year, When manage which the really confidence across and This other the enrollments some year, states environment sort that of you landscape -- stable. we probably we year looks really, is, we number. may California have overall in full recall, overall by, sort didn’t at negatively better I So, next of, think our we this

shaping on don’t is if I Tim, based nothing this it’s want do really landscape we It’s to to year know really for the see So, next policy-wise. add year how with up. you across anything. what

Tim Medina

thing trade of add terms as enrollments, in sequential Yes. normal The year, the really in in only our some overall stabilization we’ve cases earned in we I the small amounts of would And get that that driver where we improvement course. sequential revenue is revenue metric. into -- that’s modest

Jeff Goldstein

it. anticipating, year. Okay, their around to appreciate I around than your got on that line, comments you just the be I was then, it in was of if was of curious traditional or in were you optimism case, all not normal returning thoughts in your seeing churn next have saw kind schools? in any the I education, just mean, group, you the I given curious, particular age were is could students potentially students the And like in was course? quarter. or that that and was prepared returning quarter, remarks past for in this quarter the churn more though, you just general

James Rhyu

Yes.

think previous think tendency we of and some middle if I years, continues set think, years, over we that have for semester -- seeing, it But when this the do than was, to tendency year. originally I families somewhat better the a seen I we in better the out the reticence. respect, say, we’ve anything, expected than there’s just a So, be are I would -- churn in

been up, I just sort we of opening are for on surprised throughout the the would that schools think and churn bit program as pleasantly the we sort say, I to have we a us. -- were educational reticence child’s disrupt has they’re families have of the the course we little of surprised, of pleasantly trajectory saw in. year Even taken the see back But that some flow

Operator

line from Your next Jeff Silber from of Capital. question comes the BMO

Your line open. is

Jeff Silber

what were much line top reason results kind the expected, for was than beat? beat focus for the The Can both the you bottom or better on reasons the of and line.

Tim Medina

that of just James the is reason The that is line, improvement it’s primary and point that to the really during really on driver retention for the fell the made. -- line. really quarter beat the the bottom that top Better performance

Jeff Silber

Okay.

quarter last So fairly similar to what as we saw well?

Tim Medina

Yes.

Jeff Silber

us for it’s Can new That’s either the appreciate potential least I pipeline new fall. schools, at about the talk or early. gave you great. the you states Okay. still know going? I very color how that is on

James Rhyu

Yes.

meaning previous enter evolving. are for new probably years, unlike with in is there us actually think schools states and states think, increasingly to positive new it’s partners. to our new programs, I approach I evolving new And a more opportunities way,

always sort We’re new of approaching legislation a don’t a it perspective to from that need we or passed. be law policy

we work career open to programs. So, education continuing particularly to are

We small expect fall. to this open a coming handful

to We -- number of states in expect a open or to expand. programs states general, new in

pretty West we type expect Missouri, And so, to program or the places bullish. at fall. expansion like some for a new open be of that least we’re Virginia,

Jeff Silber

kind too some shows online? just increase you Okay, that? of great. of talked went outcomes. curious, seen remarks, to I’m schools there your Is academic that that any the in this to the data. may I be your it In get traditional But you relative about early pandemic, know have data also outcomes prepared

James Rhyu

Yes.

For sure.

that outperformed there schools we that most And trickling -- in and of data step took academic -- significantly. we is outcomes. surprising some that that significant We have schools, a in pretty on definitely we obviously, did fact, -- average -- our data brick-and-mortar suggests not back our in suggest the

promoter from available this data online least -- sort can on has we performance I’d our is schools that over most past our that see and perspective based that and our would learning that we what data outperformed the year. say and of other at is suggest outpaced did what So,

Operator

William the from Stephen question next line of from comes Blair. Sheldon Your

line open. is Your

Stephen Sheldon

to higher indicating that frame new registration, to of indications. return any the guess, roughly trends percentage normal how see? much hear higher First, way I there families the quantify to about you Is the or the great compares

James Rhyu

engagement I’m been reluctant a the response getting. least, our start materially And were give of will levels sort We COVID. at I at is of us track, that this providing you we’re higher. information. And engagement, I’ll very for that you families to rates me signs point the so to -- particularly, that one I are that Well, COVID-related of tell guidance positively to type tidbit point. the enrollments, did have for some specifically indicate of I’ll meaning say, did types specifically they year, coming us this that think

of of that. families didn’t lot indicate Now, course, a

But, of so, us engaged because doesn’t to population. COVID, and have maybe to those of said expect families a significant entire that us have And indicated they capture proportion very that who they that the the in been came with fall. return

the I’ll again, just exodus programs. came families it schools out brick-and-mortar not of back say, all sort and the sort mass of us this, prepared then until our we’re exiting of back to remarks, I So, seeing that riding indicated brick-and-motor with in online,

-- positive that the a see pretty indicate least are number we as enough So, to of that sticking appreciated experience significant families that it. with a trend have families they at

Stephen Sheldon

you try have the behind Really it. some with learning fallen behind fall. personalized as we’ve students the catch you especially of help about general falling to especially that helpful. think all academically last over indications that options for at With that Got heading up, know And seen demand year, can you education, some guess, provide I into online. increased guys students next I local at

James Rhyu

Yes.

into Khan on was CNBC think of -- the think, was -- I actually that’s happened before he saw public -- stat came there XX% Khan number, he or I the from kids I that so XX%, gave, mentioning school to "gotten have the call, systems. was the slide lost" a that was we in I this XX% Academy, just it

for who number so, sort come meet the online demand a for so, a of very a the ways do kids And there’s see missing to or of students right? into opportunity those meet our in And see programs, but just and good of that our been large programs, way, districts system, do have large and just we looking more demand full-time to and gone not just school kids who to a in you not slide that think broadly in that gap. have programs we

alternatives that to kids that school I emphasize well, suite gone make with we somehow some so, to and alternatives certainly we’re in alternatives them to just really sure missing problems. us, some their of running online think opportunity as can a because as I looking help there. a full-time need for have they going And I programs. think for offer should ongoing that kids that’s those help you systems, at And hopeful these be not they that they who can are provide remember of solutions lot their reach well. And in with really an We districts, ways, for like also districts and I’m that they these need

Stephen Sheldon

down one relative the in a quarter. seems quarter Last revenue fourth to the guidance. step for implies It guidance the sense. sequential like third Makes just in the me on

for normal been decline year the think, call out sequential fourth two progression I the quarter? notable a this years uptick. last sequential would over to has on in drive the fiscal Anything what a

Tim Medina

you quarter be tippy our range. would that of this It if note top guidance out we the very just another squeeze Nothing fair notable at to is one, like there.

that. out anything there. concern like particular or to So, call there’s particular in No nothing

Operator

of Sidoti. question the [Operator Instructions] Pendi line from comes from Your next Greg

Greg Pendi

notable courses expenses on costs? structure Just quick basis, summer shifts create the a year-over-year that real that to on you’ll be in offering, going especially in any is

James Rhyu

is answer won’t We headed it It’s bridge will, the us. summer we it’s Those to think that change material think of some The cost the have due the Yes sort provide if overall around the they’re help those have sort awareness think -- programs, on. no. we significant. offering summer But, It’s marginal these -- not any summer. important some it’s to gross we’re We change do shouldn’t profit over trajectory in and no. to not We kids gap, of to costs important. they or programs. have kids that of important opportunities get you also an can to with over margin them.

irrespective, we think I service I just need right going important don’t be a cost. to now. But country So, that an to provide it’s to it’s think, material

Greg Pendi

on And the then, just just year. next of terms one in Great. final one, revenue

not just -- in year specialty of falling Assuming positive the student? next benefit, is your it behind, trends some given if of mix a I’m higher a per saying a be typically that would that, revenue? revenue you higher but foreseeing that students students you’re

James Rhyu

material. Not

pursuing wouldn’t revenue trend I going that So, portend is by year next impacted that. be to our

In any think revenue not versus specialized sort year with like and wash, pursuing of non-special what trends things mix students. happened impacted get this year, more fact, mix given California our in and I or in out by falls of by overall the the

Operator

And are gentlemen, further Thank this there no this and concludes call. for time. today’s Ladies at questions participating. conference you

You now may disconnect.

Stride (LRN) 21 Apr 212021 Q3 Earnings call transcript